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ATO signals crackdown on popular deduction

The ATO has found millions of Australians claimed right up to the threshold that does not require detailed records to be kept of a popular tax deduction last year, prompting a closer compliance check this tax time.

The tax office said it will be paying “close attention” to claims for car expenses that are work related for tax time 2017.

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For the 2015/16 financial year, about three million Australians made a work-related car expense claim, which totalled over $8 billion.

However, the ATO found that a “significant portion” of those claims were right at the limit of requiring detailed records, which has raised alarm bells.

“While it’s true that you don’t need written evidence for claims of up to 5,000 kilometres per year, you do need to be able to show that you were required to use your car for work, and how you calculated your claim,” said ATO assistant commissioner Kath Anderson.

“While we have no issue with people using the cents per kilometre method and we expect that most claims at this threshold may be legitimate, we are reminding people that there's no such thing as a ‘free pass’ when it comes to deductions,” she added.

Ms Anderson noted several points of confusion among taxpayers for what they can and cannot claim with work-related car expenses.

“If you make a claim for transporting bulky tools, you need to be able to prove you were required by your employer to take these items to work, and that there was no safe place to store them,” she said.

“It is also important to make sure you don’t double-dip. In other words, you cannot claim expenses that have already been paid by your employer, including salary sacrificing arrangements.

“One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”

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